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Board as the chartering institution and from the standpoint of the Corporation as an insuring institution. Now, that is an administrative matter which we have felt the president of the bank should not exercise; that there should be a responsibility on the part of the Corporation itself to take action on the recommendations or deficiencies mentioned in the Examining Division's reports.

Mr. Brown. You will agree, I am sure, that when we are in a boom or inflationary period, most financial institutions and business organizations have pretty easy sailing. In times of depression or trouble, they often encounter difficulties.

Mr. KANE. That is right, and that is when these problems will come up.

Mr. BROWN. Therefore, under those circumstances, and with your knowledge of these two organizations and your knowledge that everybody in Congress, and I think everybody in the industry wants to do what they can to inake these institutions safe and sound, do you feel that the Congress itself should take action to increase the charge or rate of charge for insuring these associations and build up a greater reserve?

Would you recommend that, or would you not?

Mr. KANE. We have not made such a recommendation. We have made the observation that the reserve has decreased as a result of the premium charge. We have made a recommendation, I might as well mention it, that under the Federal Deposit Insurance Corporation its premium is based on the average of the amount insured for the year, whereas the FSLIC changes on the basis of savings at the beginning of the policy year. We have recommended that it be done on the average basis, which would have increased the reserve approximately $7 million over a period of 4 or 5 years.

Mr. Brown. Congress reduced this rate at the time things were just a little slow.

Now, I am just wondering if, in your opinion, you think Congress should increase the contribution, when business is a little brisk.

Mr. KANE. You have to consider FDIC and FSLIC in the same breath on that one.

Mr. Brown. I am just trying to get information and advice. I did not mean to embarrass you.

Mr. KANE. We would be glad to look into it and tell you what our views would be.

(A list of General Accounting Office audit reports follows:) General Accounting Office audit reports containing recommendation concerning

separation of the Federal Savings and Loan Insurance Corporation from the Federal Home Loan Bank Board

Fiscal year

Report on audit of

Page

H. Doc.

No.

Cong.

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9
4

706
153

1945-46 | Federal Savings and Loan Insurance Corporation..
1945–46 Federal Home Loan Bank Administration and the Federal home-

loan banks..
1947 Federal Savings and Loan Insurance Corporation.
1947 Federal Home Loan Bank Administration and the Federal home-

80th 81st

loan banks 1948 Federal Savings and Loan Insurance Corporation 1948 Federal home-loan banks and Home Loan Bank Board 1949 Federal Savings and Loan Insurance Corporation.

7 4 31 8

209 251 343 467

81st 81st 81st 81st

In the 1949 report on audit of Federal home-loan banks and the Home Loan Bank Board (H. Doc. 578, 81st Cong.), the recommendation was not specifically made. In lieu thereof (p. 34) was a paragraph dealing with the reorganization of the Home Loan Bank Board. This paragraph dealt with the overall plan for centralization of Government housing functions into a Housing and Home Finance Corporation, which the General Accounting Office prepared at the request of the Government Operations Subcommittee of the House Committee on Expenditures in the Executive Departments. The plan provided that HLBB would become an operating division of the proposed new Corporation to supervise the functions of the Federal home-loan banks. The functions of HLBB with respect to FS&LIC were to be relocated.

In the 1950 report on audit of the Financial Statements and Accounts of the Home Loan Bank Board and the Organizations under its Supervision (H. Doc. 169, 82d Cong.), no recommendation was included concerning the separation of these functions. The report stated (p. 7) that in view of the recency of congressional consideration given to the organic laws, no new recommendations to the Congress were being made. No reference was made to the old recommendation concerning separation of FS&LIC from HLBB.

The recommendation has not been included in subsequent audit reports. Beginning with the 1953 report, however, the reports have contained an observation concerning the desirability of separating certain supervisory activities of the home-loan bank presidents. These activities include both normal bank lending activities and supervisory functions over insured institutions. See page 5 of the 1953 report on audit of the Financial Statements and Accounts of the Home Loan Bank Board and the Organizations under its Supervision (H. Doc. 371, 83d Cong.). Also, see page 3 of the 1954 report on audit of Federal homeloan banks (H. Doc. 277, 84th Cong.).

Chairman Dawson. Thank you very much, Mr. Kane.

We have reversed the usual procedure. Usually, the author of a resolution is the first witness.

The author of the resolution objecting to this plan was Mr. Fascell and we have saved him to close up our hearings.

Mr. Fascell.
Mr. FASCELL. Thank you, Mr. Chairman.

I will summarize this very briefly. I had intended originally to take all of the arguments sent down in the message and analyze them one by one, and show what I felt were the reasons why the arguments could not be sustained and therefore why I had introduced the resolution to disapprove the reorganization plan.

I think the testimony before the committee has been such today that there should be no doubt in anybody's mind that this reorganization plan should be disapproved and that the disapproving resolution should be adopted.

The plan is so vague, so indefinite, it creates so many changes and puts so much responsibility upon the industry, which at this point, its delineations and its objectives are not really yet known because they are not set forth in the plan.

The plan creates a new agency. We would have 2 instead of 1. It creates new positions, at least two, and maybe more goodness knows how many more.

There is no term of office fixed for the trustees. There is no bipartisanship provided for in the new Board. It is not consistent with the Hoover Commission report, and we find, in fact, that the task force reported one thing and the Commission itself reported something else.

We find that it divests Congress of whatever control it might have and changes the complexion of a so-called independent agency to one that would be completely without any doubt subservient to the control and direction of the President, and I am not so sure that is a good thing. And whether it is or not certainly should be the question of intense legislative study on the part of Congress.

It gives powers to the Bureau of the Budget with which I have never been familiar before, and I think some of my older colleagues have expressed the same question as to whether or not this is a wise course to set down in a reorganization plan the power of the Bureau of the Budget to delineate beyond those things which were proposed in the original Reorganization Act of 1949.

It is my personal belief, after listening to the testimony and the explanation of the plan, that that is exactly what the plan does. It gives a broad grant of authority to the Bureau of the Budget to delineate functions because of the fact that they could not be expressed clearly and definitely in the plan itself, and therein, in my opinion, lies a great danger, if Congress were to pass and approve or allow this reorganization plan to be approved.

Then, there is the question of the burden upon management, and I can envision and I think all of the management of the industry can envision exactly what I envision, with inspectors running all over the place, two sets of examinations, all kinds of forms, with no clear understanding as to exactly what would happen, and yet the expression in the plan itself and the statement outside of the plan that contemplates the fact that only at the policy level would this thing have two heads and all the way down it would be joined. That is what it says, but we do not know whether it would actually be that way or not.

We have objections which I would like to get in the record at this point from the Federal Savings and Loan Advisory Council. I will submit a certified copy of their

resolution, also from the Federal Home Loan Bank of Greensboro, with a letter of the president, together with a resolution of the board of directors opposing the plan.

Also opposition by the and I am just picking some of these at random; there are many, many more from the industry-Savings & Loan Association, Dallas, Oreg.; The Bay Ridge Savings & Loan Association of Brooklyn, N. Y., Jefferson Federal Savings & Loan Association, Louisville, Ky.; First Federal Savings & Loan Association, Austin, Tex.; Union Federal Savings & Loan Association, Baton Rouge, La.; and Florida Savings & Loan Association. (The documents referred to follow :)

ORLANDO, FLA., June 23, 1956. Hon. DANTE B. FASCELL, House of Representatives,

House Office Building, Washington, D. C.; Members of the executive committee of the Florida Savings & Loan League meeting today at Orlando express high praise for your leadership in introducing House Resolution 541, disapproving Reorganization Plan No. 2. They congratulate you on your understanding of the issues; are grateful to you for the interest you are showing in the welfare of the savings and loan business and the public they service and are pleased that the leadership on this issue before the Congress is in such able hands.

FLORIDA SAVINGS & LOAN LEAGUE,
Carl F. DISTEL HORST,

Executive Vice President.

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THE DALLES, OREG., June 23, 1956.
Hon. DANTE B. FASCELL,
Member, Subcommittee on Reorganization,

House of Representatives, Washington, D. C.;
As the Oregon representative of the savings and loan industry, I wish to
register by opposition to Reorganization Plan No. 2, on basis no emergency
exists, this action is hasty and the problem, if any, should be carefully studied
by constituted authorities concerned with savings and loan operation before
taking action.

B. M. KEITH.

FEDERAL HOME LOAN BANK OF GREENSBORO,

Greensboro, N. C., June 22, 1956,
Hon. DANTE B. FASCELL,
Member of Congress, House of Representatives,

Washington, D. C.
MY DEAR MR. FASCELL: As you know, the Federal Home Loan Bank of Greens-
boro is a reserve credit institution which serves 549 member savings and loan
associations, 89 of which are located in Florida. The bank's directors have
studied Reorganization Plan No. 2 which was transmitted to the Congress of the
United States on May 17, 1956. Individually and collectively, they have expressed
their opinions that the plan is not in the best interests of the Federal Govern-
ment, the more than 3 million savers and borrowers served by the savings and
loan associations in the Fourth Federal Home Loan Bank District, and the
savings and loan business.

We are enclosing a copy of a resolution adopted by the bank's board of directors on June 18, 1956, which we hope you will consider in your deliberations on Reorganization Plan No. 2. You will notice that the bank's directors commend and approve the position in opposition to the plan which has been taken by the Federal Savings and Loan Advisory Council and the national savings and loan trade organizations. Yours very truly,

J. M. SINK, Jr., President.

RESOLUTION OF FEDERAL HOME LOAN BANK OF GREENSBORO, GREENSBORO, N. C.

Whereas Reorganization Plan No. 2, heretofore submitted to the Congress of the United States, provides for a drastic change in the organization and operation of the Federal agencies by separating the Federal Savings and Loan Insurance Corporation from the Federal Home Loan Bank Board; and

Whereas the Federal Savings and Loan Advisory Council has adopted a resolution urging the rejection of said Reorganization Plan No. 2; and

Whereas the savings and loan national trade organizations have taken prompt and vigorous action to alert the savings and loan business and the Congress to the dangers and weaknesses of Reorganization Plan No. 2, and have adopted a program of opposition to the plan: Now, therefore, be it

Resolved, That the board of directors of the Federal Home Loan Bank of Greensboro commend and approve the actions of the Federal Savings and Loan Advisory Council and the savings and loan national trade organizations in opposing Reorganization Plan No. 2 and in urging the Congress of the United States to reject said plan; and be it further

Resolved, That a copy of this resolution be forwarded to the Members of Congress from the Fourth Federal Home Loan Bank District, to the members of the Federal Home Loan Bank of Greensboro, to the chairman of the Federal Savings and Loan Advisory Council, and to the executive officers of the savings and loan national trade organizations.

FEDERAL SAVINGS AND LOAN ADVISORY COUNCIL
Whereas the Federal Savings and Loan Advisory Council was crea “ed by
Congress under sertion 8 (a) of the Federal Home Loan Bank Act to confer
with the Federal Home Loan Bank Board and the Board of Trustees of the
Federal Savings and Loan Insurance Corporation on matters affecting the
Federal home-loan banks and their members; and

Whereas the 17 members of the council, elected and appointed from each of the 11 regional Federal home loan bank districts throughout the Nation, were given no notice of Reorganization Plan No. 2 until it was made public a few days before the council's meeting of May 24–25 and the council had absolutely no opportunity to study the proposal or offer its considered advice thereon; and

Whereas Reorganization Plan No. 2 provides for a drastic change in the organization and operation of the Federal agencies by separating the Federal Savings and Loan Insurance Corporation from the Federal Home Loan Bank Board; and

Whereas such separation of the agencies would result in increased cost, needless and conflicting duplication of supervision and inject partisanship into a newly created independent agency; and

Whereas the advisory council and the national trade associations are currently conducting intensive studies designed to seek a Federal Home Loan Bank System of maximum effectiveness to the savers and home owners of the Nation : Now, therefore, be it

Resolved, That the Federal Savings and Loan Advisory Council strongly urges the rejection of Reorganization Plan No. 2; and be it further

Resolved, That a copy of this resolution be transmitted to the President of the United States and to Members of Congress for their consideration and action, and to the Nation's 6,000 savings and loan associations whose business is so vitally affected by this abrupt act.

I hereby certify that the above is a true and correct copy of a resolution adopted by the Federal Savings and Loan Advisory Council at Washington, D. C., on May 25, 1956.

FEDERAL SAVINGS AND LOAN ADVISORY COUNCIL,
LACY BOGGESS, Secretary.

BAY RIDGE SAVINGS AND LOAN ASSOCIATION,

Brooklyn 9, N. Y., June 20, 1956. Reference to Reorganization Plan No. 2. Hon. DANTE B. FASCELL, House of Representatives,

Washington 25, D.C. SIR: Your cooperation is respectfully requested in the defeat of Reorganization Plan No. 2 for the following reasons:

1. The probable necessity of filing separate reports to both the Federal Savings and Loan Insurance Corporation and the Home Loan Bank Board.

2. Submission of matters requiring approval of both agencies, first one and then the other.

3. Added examination costs.

4. Effect of reorganization plan will result in chaos through conflicting rules and regulations.

5. Expensive duplication of examinations.

6. The present single agency system to handle savings and loan affairs has been developed over a period of 25 years and has produced a strong and progressive nationwide system of savings institutions which now finance a substantial part of our Nation's homes.

7. We question the wisdom of tampering with the present single-agency system as being questionable.

8. The proposed reorganization plan would not result in economy of operation and would increase the cost of operations to individual savings institutions.

9. Two boards with overlapping responsibilities for savings and loan operations might well result in conflicts of policy and added confusion.

10. We are ready to support any constructive improvement in supervision of savings and loan business. The United States Savings and Loan League is currently making a careful study of the Federal home-loan bank system with that end in view.

May we count on your support in the defeat of the proposed Reorganization
Plan No. 2 about to be submitted to you?
Respectfully,

HENRY G. STEIN, President.

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